Monday, July 12, 2010

FIFA 2014: The Financial Party Starts in Brazil. Fiscal Responsibility Thrown Out the Window

Agencia Estado in Brazil reports that President Luiz Inacio Lula Da Silva will sign a decree allowing the 12 cities that will host 2014 World Cup matches into debt beyond the limits authorized by the Fiscal Responsibility Law.

The law restricts municipalities' spending to 60% of the collection. The decree will allow them debt equivalent to twice of what they collects.

With late bids and many works not yet started, the change in the law will facilitate public spending and allow for less bureaucratic approval. The federal government will declare a period of four years except the Fiscal Responsibility Law, and allow the debt to the works aiming at the World Cup are held. It is estimated that contracts worth a total of $50B will be the subject of bids in the next four years due to the World Cup.

There are already constitutional questions as to whether the President can sign such decree.

Zero taxes

In addition to increased borrowing capacity, the states and the federal government will not collect a penny in taxes from FIFA. This is a requirement by FIFA, a hugely profitable entity, for allowing the World Cup.


Rio has already begun to celebrate the World Cup. Yesterday, a huge banner was unfurled at the city's symbol, the statue of Christ the Redeemer. At the feet of the 38 meter statue the banner read, "Welcome to Brazil 2014 World Cup."

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